How to seek investors for your startup
When it comes to starting a startup, one of the most frequently asked questions is, “How to find investors?” If you too are no exception to this rule, you should know that you can consider yourself very lucky: nowadays, in fact, there are many answers to this question. More precisely, there are many ways through which you can find funds and investors and connect with them effectively so that you can achieve your goal: to convince them to believe in your business idea.
While you can count yourself lucky because it is easier today to find private investors willing to fund a startup, you should also know, however, that luck does not kiss you overnight without you making any effort to deserve it. Put your mind at rest: the chances that a big investor will be so impressed by your business idea that he or she will shower you with gold, without you doing anything to get noticed, are close to zero. You therefore absolutely must know where and how to find investors.
In the following lines, precisely, you are about to discover the best tips on how to finance a startup by finding private investors.
How to find investors for your startup
In recent years, platforms dedicated to fundraising have multiplied on the web. Not only that: today, these platforms involve more or less directly various investor figures, from business angels to banks, looking for new ways to invest their capital.
By resorting to platforms of this kind, you have the great advantage of being able to benefit not only from the possibility of obtaining funding, but also from high visibility. The challenge for you, in this case, is to identify the right platform. There are different types of them, and among all of them, you can for example mention equity crowdfunding platforms, through which, in return for an investment that can be even small, a startup commits itself to give the investor a stake in it.
Social media (Linkedin in the first place) are other good allies for you who want to attract investors because on such platforms it is very easy to get noticed. To gain more visibility you can use sponsored posts or collaborate with some influencers. Direct messages are also a valuable tool at your disposal because they can give you a chance to connect quickly with investors.
It may surprise you, but blogs are also a great way to find new investors: telling a story in an engaging way allows you, in fact, to capture their attention and lead them step by step to your goal. But that’s not all: you can also turn your attention to the investors’ own blogs and comment on their articles to make contact.
Emails are another channel that is all too underestimated by those who want to find out how to find investors for a startup: in fact, there is no shortage of examples of entrepreneurs who have been able to find funding for their projects precisely because of an email message.
From the online world we move to the offline one: participating in events ensures you great visibility, an aspect that, as already pointed out, assumes decisive importance in finding investors for your startup. Here, too, it is possible to identify different types: you could, for example, opt for pitch night-style events, i.e., created specifically to present your business ideas, or you could attend industry trade fairs or trade association conferences. The advice is to try to find out early on who will be attending the events so that you can choose more precisely which ones to present at.
Startup accelerators are another arrow to your bow: this way, in addition to money, you can receive coaching and support in various operational areas, but you must be careful to choose the right one. How? You can, for example, analyze the achievements of those who have previously joined the accelerator program that you think might be right for you.
Finding investors: when it is necessary and how to choose them
Up to this point we have mostly talked about funders in general terms, but remember that there are different types of investors. In order to choose the best solution for your needs, you will have to do some further thinking about your funding plan: at what stage are you in the development of the startup? You have to remember, in fact, that some funder figures invest only at certain stages and that timing, in seeking investors, is crucial.
When your startup is just an embryonic project not yet validated, unfortunately, you can only rely on your own resources or, mostly, on the help of friends and family.
It is in the so-called “seed” stage, i.e., when the business idea begins to structure itself, that external financing can be obtained. Business Angels, i.e., the figure of investors most sought after generally by startuppers, intervene precisely at this time or in the later (“early stage”) phase, in which the startup begins to receive the first feedback from the market. Business Angels are, generally, high net worth individuals (sometimes they are former entrepreneurs themselves) who invest their money on projects of their interest. Business Angel investments, however, tend not to be particularly high.
Venture capitalists also intervene only when the startup project has now been validated. These are financial companies that specialize in investment and are ready to support more substantial funding. To access even larger investments, however, one generally has to wait until the fourth stage (“early growth”), when the startup has now turned into a real company.
How to convince potential investors
To convince investors to financially support your startup you need to know what they are looking for. To answer “a highly innovative company with very high profit potential” would be trivial; there are, in fact, specific characteristics that investors look for when considering a project for funding.
You should know, for example, that those who invest in startups often tend to choose companies that operate in sectors and markets in which they already have experience or, at any rate, already know. Since investors tend to diversify their investments, it is very important, then, to demonstrate that you can offer something unique in the market. Showing investors evidence that consumers are interested in your startup and what it offers them is another useful ploy to convince them to choose you.
Other aspects that investors pay special attention to are the startup’s set-up costs, which must be realistic and reasonable, and the marketing plan, which must be clear and detailed. To win the trust of potential investors, you also need to be as honest and transparent as possible, but also show that you are clear about where your startup can go in terms of scalability and financial prospects. There is, finally, one last factor you need to consider: investors tend to have more confidence in startups with a very strong and already established management team.
What it takes to raise investment
There are two key documents when seeking investors: the business plan and the pitch. The first term will sound more familiar to you, but it is useful to be reminded what exactly it is: the business plan is a document within which the startup’s short-term and long-term strategic and financial goals must be summarized. Not only that: the business plan, through detailed plans and budgets, must also explain how the goals that have been set will be achieved.
It is now time to understand, however, what a pitch is : it is a short (a few seconds to a few minutes) and persuasive speech, which aims to explain the business idea and make its value perceived, so as to intrigue the potential investor and push him to learn more about it. Based on its length, three types of pitches can be distinguished:
- the high concept pitch, which summarizes the business idea in one sentence;
- the elevator pitch, in which you have 30 seconds (the length of an elevator ride) to present your idea;
- the pitch deck, in which you have more time (about 15-20 minutes maximum) and can use slides.
Knowing what it takes to raise investments, however, is not enough to answer the question “How do you find investors?”; you must also be clear, in fact, how to make the most of these documents.
To present your startup effectively you need to follow a few pointers. The first comes directly from Dave McClure, founder of 500Startups:
“To make a truly effective presentation, focus 80 percent on the problem and 20 percent on the solution.”
Also, remember to stay well focused and maximize your time. Your presentation should be short and clear: tell the story behind your startup but place a strong emphasis on your Unique Selling Proposition , that is, what makes your startup different from what is already on the market, and explain precisely who it is intended for. Use numbers and demonstrable data to support your claims. Finally, you can use another effective ploy: give the potential investor a chance to see and experience your product firsthand.